U.K. Extends 80% Furlough Pay to End of March 

U.K. Chancellor of the Exchequer Rishi Sunak extended payments to furloughed employees until the end of March, as he sought to provide certainty to the country’s coronavirus-ravaged economy.

The furlough program had been due to run until Dec. 2, when a partial English lockdown is due to end. But the government will continue to pay 80% of wages for the hours employees are unable to work because of the effects of the pandemic for another 4 months, Sunak said on Thursday.

“The government’s intention is for the new health restrictions to remain only until the start of December,” Sunak told the House of Commons. “But as we saw from the first lockdown, the economic effects are much longer-lasting for businesses and areas than the duration of any restrictions.”

The extension to the furlough program means the U.K. state will be paying the cost of workers’ wages for 13 months, under emergency measures originally intended to last just three months during the first peak of the pandemic in the spring.

Extending furlough until the end of March marks a stunning policy reversal from Sunak. For weeks he had argued the program should end on Oct. 31 to be replaced with new, less generous measures focusing on supporting “viable” jobs.

Sunak has stressed he wants to move to restore the public finances to a sustainable footing and had been arguing against another economically damaging lockdown, requiring a fresh injection of state support.

But as data showed the resurgent virus threatened to overwhelm the National Health Service, Prime Minister Boris Johnson ordered a partial lockdown for England, closing bars and restaurants and non-essential shops for four weeks from Thursday.

‘Real Impact’

“These measures, though they are tough, they are time-limited,” Johnson said in a televised press conference later on Thursday, adding that four weeks should be enough to “make a real impact” on the pandemic.

But the plan meant Sunak had to act again to protect the economy. His statement to Parliament came after the Bank of England announced another round of monetary stimulus, boosting its government bond buying target by 150 billion pounds ($196 billion).

The purchases have increased by 440 billion pounds this year and have helped keep yields low and stable, giving the chancellor room to increase crisis spending without worrying about spiraling debt costs.

“All economic and monetary institutions are playing their part,” Sunak said, adding that he’s in constant communication with Bank of England Governor Andrew Bailey. “As the situation evolves, our responses are carefully designed to complement each other and provide certainty and support to people and businesses across the U.K.”


In order to douse accusations of unfairness from local and regional leaders, Sunak tried to reassure Scotland, Wales and Northern Ireland that the furlough program is open to them, too.

The Treasury estimates the furlough program costs about 1 billion pounds per million workers each month. The Bank of England predicted before the furlough was extended that about 2.5 million people will need wage support between December and April, down from 5.5 million during the current English lockdown.

U.K. Extends 80% Furlough Pay to End of March 

It’s the fifth time in six weeks the chancellor has announced major changes to job support as a second wave of the virus spreads over the U.K., exceeding even the worst projections of government scientists. Health authorities reported another 492 deaths on Wednesday.

The chancellor on Sept. 24 published a winter economy plan that was supposed to tide the country over the difficult season, including a successor to take over from the furlough program on Nov.1, under which the government subsidized unworked hours for employees returning part-time.

On Oct. 9, Sunak beefed that up by adding new government payments of the wages of employees at businesses forced to shut under the tier system. Just under two weeks later, Sunak made further changes to the program, increasing the generosity of state payments to employees returning part-time.


And on Oct. 31, just hours before the original furlough program was due to expire, the Treasury said it would continue to apply until the end of the English lockdown on Dec. 2.

Sunak said the level of support will be reviewed in January. He also scrapped a job retention bonus planned at the end of that month for companies taking employees back out of furlough, saying the policy would be redeployed at an “appropriate time.” While furlough remains in place, its planned successor program, the Job Support Scheme, also falls away.

But while the Treasury maintains all measures are under constant review, the constantly changing levels of support have increasingly frustrated businesses, and opened Sunak up to criticism from the opposition Labour Party.

“Businesses and workers have been pleading for certainty from this government, but the chancellor keeps ignoring them until the last possible moment after jobs have been lost, and businesses have gone,” Sunak’s Labour counterpart, Anneliese Dodds, told Parliament.

Business groups, for their part, welcomed the chancellor’s measures, with the Confederation of British Industry characterizing them as “much-needed steps,” and the British Chambers of Commerce saying the changes “give businesses significant reassurance over an uncertain winter.” Federation of Small Businesses National Chairman Mike Cherry called the intervention “bold.”

©2020 Bloomberg L.P.

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